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September 19, 2006

Amaranth Advisor Sent to the Gas Chamber - Hedge Fund Loses $2 Billion

posted by MR WAVETHEORY at 9/19/2006 05:36:00 PM
According to Barron's, Amaranth Advisors, a hedge fund, with $7.5 billion lost 35% of its value on a natural gas bet that went wrong. That's $2 Billion. By the way, an amaranth is a weed in case you were wondering.

Amaranth Advisors, a $7.5 billion hedge fund, in the genteel terminology of trading desks, Monday became the latest to blow up. Appropriately enough, the explosion came as the result of misplaced bets on the direction of natural gas prices.

The losses may exceed 35%, said a letter to shareholders from Amaranth founder and president Nicholas Maounis, according to wire-service reports. The stunning reversal came as gas prices plunged last week amid a growing surfeit of natural gas and crude oil at the end of the summer driving and air-conditioning seasons and the absence of hurricanes the likes of which sent prices soaring last year.

Here's what the WSJ had to say. It doesn't sound like he was doing any hedging.

Of all the traders gambling big sums on energy, a 32-year-old Canadian named Brian Hunter made some of the brashest bets and the fastest money.

Last week, he fell hard, proof of how quickly fortunes can reverse in gyrating commodities markets.

Here in this bustling new energy frontier, Mr. Hunter headed the energy desk for a Connecticut hedge fund called Amaranth Advisors. At the end of August, trading natural gas, he was up approximately $2 billion for the year. Then Mr. Hunter lost roughly $5 billion, in about a week.

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